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Should the Federal Government Be Giving Small Business Contracts to Fortune 500 Firms?

05/23/2013 01:32 pm 13:32:39 | Updated Jul 23, 2013
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Ever since the economy took a nosedive in 2008, I have watched with total amazement as presidents, Congress, economists and the mainstream media have totally and completely ignored the single most important factor in the U.S. economy.

Small businesses create virtually 100 percent of the net new jobs in America.

Let's take a quick look at the facts. According to the U.S. Census Bureau data, small businesses are responsible for over 90 percent of the net new jobs in America. The Kauffman Foundation released a study that found small businesses had created 100 percent of the net new jobs in America since 1980.

Over 99 percent of all U.S. firms have less than 500 employees. 98 percent have less than 100 employees and 89 percent have less than 20 employees. There are over 28 million small businesses in America. They are responsible for over 50 percent of the private sector work force and over 50 percent of the GDP. Over 90 percent of all U.S. exporters are small businesses and the overwhelming majority of technical innovations in America come from small businesses.

If the U.S. Census Bureau data and if the Kauffman Foundation data are correct, large businesses in America have created somewhere between zero percent and 10 percent of the net new jobs in America.

If you want to know why unemployment is still way too high and why the middle class economy is still struggling, I think I know the answer. When you look at TARP and the American Reinvestment and Recovery Act, about 95 percent of our tax dollars that went to business, went to big business. Think about that for a moment. When the U.S. Census Bureau data shows small business have created over 90 percent of the net new jobs in America, our government gave 95 percent of the funds designed to create jobs to the big businesses that have created between zero percent and 10 percent of the net new jobs. Raise your hand if that sounds insane to you.

Glad to see then. I was starting to think I was an economic god from the future and could see things no one else could comprehend about job creation on this planet.

If that sounds crazy, I have bad news -- it gets worse. Back in 1953, President Dwight Eisenhower and Congress realized small businesses were the engine of economic growth in America. They passed the Small Business Act. Today, based on the original provisions of the Small Business Act current federal law requires that a minimum of 23 percent of the total value of all federal contracts and subcontracts shall be awarded to small businesses.

Here is the bad news part. Over a dozen federal investigations have found most of the contracts the federal government claims are awarded to small businesses actually wind up in the hands of large companies, including Fortune 500 firms and many of the largest foreign owned corporate giants in the world. In 2003, the General Accounting Office found over 5,000 large businesses were getting federal small business contracts. In 2005, the Office Inspector General for the Small Business Administration referred to the diversion of federal small business contracts to worldwide corporate giants as, "One of the most important challenges facing the Small Business Administration and the entire federal government today."

If Dwight D. Eisenhower knew that the wonderful economic stimulus plan he signed into law had been perverted into the total and complete opposite of everything he and the Congress of 1953 intended it to be, he would turn over in his grave. If he knew our government was counting federal contracts to Lockheed Martin, Boeing, Raytheon, Rolls Royce, British Aerospace and Russian government owned RosoboronExports, as small business contracts, I think he would rise from the dead and bitch slap every member of Congress.

When Eisenhower left office he gave his famous speech warning of the growing power of the "military industrial complex." It looks like he knew what he was talking about because that is exactly who seems to be hijacking the lion's share of government small business dollars. Did I mention that not only are these monstrous corporate giants shipping American jobs out of the country at a record rate and creating ZERO net new jobs in America, many of them are paying little to no federal income tax?

Welcome to democracy 2013 style and the best government money can buy, as they say.

I have a simple and possibly brilliant idea. I may even get the Nobel Prize in economics for this one. As crazy as it sounds, why don't we try not giving federal small business contracts to the biggest companies in the world?

I have heard some wacky conspiracy nut guy in California has actually written a bill to accomplish just that and he has even had it introduced to Congress. I think it's H.R. 1622. Call me crazy but I think it's worth a shot.

Check out my video on this blog post Here